Gasoline prices are beginning to mirror the fuel grades. The past few weeks have seen prices jump from "Plus" to "Super" overnight and the summer driving season presupposes little relief. The only thing getting relief is the wallet as it deflates. So why did it happen and what can be done?
The short answer to why prices are high is because of two main factors: a 4 percent production cut in December by OPEC and an increased demand for oil. Not only is demand up in a booming U.S. economy (4.4 percent growth last quarter) but also worldwide. Less availability equals higher prices. Political instability in the world's main oil-producing regions, the Middle East and Venezuela, is also not helping.
OPEC recently decided to up production by 8 percent, which will bring some relief. However, short-term increases do not provide long-term energy stability solutions. Certain issues need to be addressed.
Currently, the U.S. fuel market has 18 gasoline blends because of mandated fuel specifications in certain locales. These "boutique fuels" cost more to make due to their specialized nature. They also take more crude oil to make them than regular gasoline. The market's fractured nature hampers price breaks and efficient distribution.
Such a splintered market will not produce long-term stability. If anything, it can prolong price increases if a lack of availability hits a certain area. The ability to shift gasoline from market to market does not exist; the blends need to be simplified and streamlined to ease potential supply problems.
Next is the biggest future obstacle: where we get our oil from. As noted above, the world's major oil-producing areas are rife with volatility. It somehow figures that this is where we'd get most of our imported oil from. Confidence rises not from this considering that two-thirds of our oil supply comes from overseas, most of it from these areas. New sources are needed within our borders.
There are several areas of known reserves the United States has not tapped. Due to restrictions and political chicanery, oil lies untouched off both coasts and in the Arctic National Wildlife Refuge (ANWR), the last being a reserve with twice the size of Texas' supply. If our energy needs are to be met over the long run, it stands to reason that we need to make use of the resources we have.
Ideas such as these were called for by President Bush's energy bill, but it was subsequently killed in the Senate. The most ironic aspect is those that voted against the bill are now the ones blaming the administration for not doing enough to keep gas prices low. The whole point of the bill voted down was securing a steady, accessible energy supply that kept prices down.
Some have derided these ideas in the name of environmental hubris, but they conveniently forget that at some point we'll have to go get those resources. Without them, our economy crashes. What makes sense is to do it now in a responsible, controlled manner rather than a helter-skelter approach when the pinch comes.
The long-term solution to rising gas prices is to tap the resources we have here while developing alternative options. Of course, if all else fails, we could just invade a tyrannical Middle Eastern dictatorship with huge reserves to guarantee a steady flow.
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